Is Chainlink (LINK) A Good Investment?

Should I buy Chainlink (LINK) right now? A question that crypto investors and enthusiasts often ask about one of the hottest and talked about projects in the crypto market. This makes perfect sense when you realize that this cryptocurrency, which was not even in the top 100 cryptocurrencies by market capitalization in mid-2018, is now ranked 5th with a market cap of almost $ 5 billion.

So, what’s the secret behind this incredible journey? What is Chainlink in the first place? Is the project legit? What makes Chainlink a good investment right now? So many questions that we will try to answer in an easy-to-understand way even for complete beginners. The purpose of this article is to find out if it’s a good idea to invest in Chainlink and try to provide the most accurate and unbiased Chainlink price prediction.

However, before getting into any price discussion, you need first to understand what is Chainlink, how its underlying technology works, and how important are the services it provides to the crypto space. So, without further ado, let’s get started!

What Is Chainlink?

Chainlink was created in 2017 by SmartContract Chainlink Limited, the company conducted an ICO during which it was able to raise $ 32 million. The main objective of the project is to become the middleman software solution that allows smart contract applications on any blockchain to communicate, receive, and send data to off-chain sources through the use of oracles. LINK is the digital asset ERC-20 token used to pay for the services provided by the network.

What Problem Chainlink Is Solving?

Blockchains and smart contracts can only interact and receive data from their own networks. As a result, their possibilities and use cases are limited. That’s where Chainlink comes in! The project provides a network of nodes that relies on oracles to allow smart contracts to interoperate with off-chain data sources and expand their capabilities to bank payments, market data, event data, and any other type of data sources.

Let’s say you want to build a dApp that specializes in providing real-time sports results. Without the help of an oracle, this dApp wouldn’t be able to interact and receive data from off-chain sources. By connecting a Chainlink oracle, this dApp will be able to receive the needed data and provide all the necessary information to users.

In general, using centralized Oracles is not enough to ensure the security and reliability of using a single centralized data source. To solve this, Chainlink uses a network of decentralized nodes that provide decentralized trustless oracles.

To get back to our previous example, if eight nodes deliver the same result for a specific football game, and two other nodes deliver a different result, Chainlink uses an Aggregating Contract to discover that those two nodes are mistaken (or even dishonest) and ignore their results. This process eliminates the risk of errors when providing off-chain data to smart contracts.

Why Is Chainlink So Popular Among Crypto Investors?

By investigating different crypto communities and searching why is chainlink (LINK) a good investment, you will quickly notice that the majority of crypto investors hold at least a small portion of LINK tokens. But why’s that? Why is Chainlink one of the most sought-after cryptocurrencies? Well, there are many different reasons behind the hype around the project.

First of all, Chainlink is not competing against any major project in the crypto space, it’s quite the opposite, Chainlink aims to link public blockchains to off-chain real-world entities such as APIs by using a secure, decentralized, and trustless system. Thereby, it offers crucial and much-needed services to public blockchains and businesses and provides much more flexibility for developers.

Also, Chainlink has the advantage of being the first mover within the oracle services niche. It’s true that the likes of Band protocol and DIA are providing services within the same niche, however, Chainlink is a step ahead and is already adopted and used by almost all crypto projects as their blockchain oracle provider.

The turning point that led the project on the road to success and popularity is the strategic partnership with Google Cloud. This partnership allows Google Cloud users to use Chainlink to connect to BigQuery, a very popular Google cloud service. Chainlink has also established many major partnerships with other tech giants such as Intel, Oracle, T-Systems (a subsidiary of Deutsche Telekom), and China’s BSN.

The last point I wanted to mention about Chainlink is its growing community. The project has one of the largest and most dedicated communities in the crypto space. The particularity of Chainlink is that the service it offers allows it to have permanent exposure to investors from other projects, which continuously attracts new investors.

Chainlink’s Price Action 2017-2018

Since the previous bull run of 2017, it is fair to say that Chainlink has been the biggest success story in the crypto industry. Therefore, before making any Chainlink price prediction and answering the question “is Chainlink a good cryptocurrency to buy now?”, it is extremely important to explore Chainlink’s previous price action, and understand the reasons behind the incredible rise of LINK’s price.

• 2017-2018

Right after its ICO, the LINK token has been listed on major exchanges such as Binance. This helped to provide way more liquidity and visibility to the token. As you can see in the chart below from coinmarketcap, the price of LINK has been highly correlated to the overall crypto market. During this period, Chainlink reached a high of $1,29 during the famous altcoin bull run of January 2018. Then, the price of the token started to collapse along with the bear market reaching a low of $0.17 in June 2018.

• 2019

In 2019, the price of LINK token kept following the bearish trend of the market until June 2019 and the announcement of the partnership with Google. It was the turning point in LINK’s price action. As a result of this partnership, the price started to climb in an unprecedented way and became completely uncorrelated with the rest of the market. This price increase was accompanied by an increase in trading volume following the listing of Chainlink on Coinbase, one of the largest cryptocurrency exchanges.

On June 29, Chainlink reached a yearly high of $1.5 billion in market capitalisation and a token price of $4,45, while the majority of other cryptocurrencies were still suffering losses due to the bear market. Moreover, Chainlink closed 2019 with more than 600% profit, outperforming by far Bitcoin and the rest of the market.

• 2020

Despite the Coronavirus outbreak situation, 2020 has been an extremely positive year for the crypto market, including Chainlink. The technology provided by the project has been the center of the DeFi boom of 2020, therefore, it made perfect sense to see Chainlink’s price rising and taking advantage of its growing popularity.

LINK token opened 2020 at $1,80, then the price started to climb until it reached its all-time high at $20 on August, 16th. An incredible rally of +1100% ROI in less than 8 months. Despite Zeus capital attempts to discredit Chainlink’s project and to scare off investors, the price remained relatively solid and was not much affected by Zeus Capital’s claims and accusations.

Chainlink is deeply involved in the DeFi space, most DeFi applications and services require off-chain price data sources. Thus, the demand for Chainlink was increasingly growing every day pushing the token price to new highs.

As you can see, LINK token has been very rewarding for its holders during the last couple of years. But how about the present and the future? Should you buy Chainlink now? Is it a good idea to get your Chainlink bag and to hodl it during 2021? That’s exactly what we’re going to find out.

Is It a Good Time to Buy Chainlink?

It is very likely that Chainlink will keep up its momentum. It is true that the cryptocurrency market is unpredictable and highly volatile, making it impossible to predict for sure future market moves. It is also true that Chainlink’s meteoric rise since 2019 may keep away some investors who think that the potential upside is very low after all this rise. However, there are many factors we can rely on to make our Chainlink price prediction for the short and mid-term that are pointing in the other direction, that of the price increase.

Many crypto experts and observers are expecting Chainlink to reach $150-$200 during the upcoming bull run, some others are even predicting more optimistic projections reaching as high as $1000 per LINK token. But how realistic is that? 

Well, currently LINK is an asymmetric investment opportunity, meaning that its potential upside is much more significant than its potential downside, regardless of overall market conditions. This is mainly due to the nature of the services it provides. Chainlink has positioned itself as an essential actor in the crypto space.

If the decentralized finance boom continues to grow, more DeFi applications will be created and more Chainlink services will be required. In order to use Chainlink oracles, these applications have to run nodes by locking huge amounts of LINK tokens driving the price higher. In the opposite case, if the DeFi space loses some of its hype, Chainlink will still be needed, whether it is from dApps or from new businesses that want to get into blockchain and use smart contracts technology.

Another factor that could have a huge impact on LINK’s price, is the upcoming “staking” feature that will be implemented. This will undoubtedly lock more LINK tokens and have a positive impact on the price. According to viewbase, more than 4.6 million LINK tokens have been withdrawn from exchanges during the last 30 days. Perhaps in preparation for staking? Or just whales holding their tokens for the long term? Whatever the reason, this is great news from a token economics perspective.

From a technical analysis point of view, Chainlink has been a very solid investment, despite having its RSI in an overbought position many times, it kept going up surprising many traders and experts.

So, is Chainlink a good investment in 2021? Yes, Definitely. However, it is difficult to accurately predict the price it could reach since many factors are involved, the most important one being the overall market condition. The $150-$200 prediction mentioned above is pretty realistic in a bull market, or even during a stabilization period for Bitcoin. However, if the current uncertainty due to COVID-19 causes a new crypto market crash, it’s very unlikely to see a LINK token at 150$.

Verdict

Chainlink has currently the 5th highest market capitalization in the cryptocurrency market. The whole crypto community agrees that this is a well-deserved place, Chainlink is a legit project with a strong and dedicated community. Also, providing oracle services for public blockchains and businesses is a multi-billion dollars industry (maybe trillions in the future). Chainlink managed to have the first move advantage, it is currently the most popular and reliable project operating in that specific niche.

Despite its incredible rise, Chainlink has still significant upside potential. Both fundamental and technical metrics are predicting much higher prices for LINK token (current price: $12,58). The project is establishing new partnerships and integrations almost every day, thereby locking more LINK tokens. Also, the implementation of staking will lock even more tokens for the long-term. Finally, if we combine all these factors to a crypto bull market, we could easily see a $150-$200 LINK token.

So, Chainlink could be a great long term investment. However, never forget to do your own due diligence, the cryptocurrency market involves high risks, so never invest more than you can afford to lose.

Disclaimer: The information in this article is for educational purposes only. Please do not treat it as investment advice. Do your own research.